The EU finally agrees a landmark ruling over future bank failures
The days of European taxpayers footing the bill for bank rescues could soon be over. Overnight, officials in Strasbourg, representing the European Parliament and EU member states, agreed new rules for future bank rescues.
Under the “bank resolution and recovery directive” created in Strasbourg, bond holders and large depositors will now be in the firing line for losses from the start of 2016, earlier than planned (although a bail in happened in Cyprus this spring).
National authorities will establish resolution funds or introduce corresponding levies under the plan, which could be tapped if a bank failed. Governments could still launch bailouts under certain circumstances and with EU approval.
In a statement the EU commissioner Michel Barnier stated;
This law, which applies to all 28 Member States, is an essential piece of the financial regulatory framework that we are building piece by piece for all banks of the European Union in order to draw the lessons from the crisis. Ensuring that failing banks can be wound down in a predictable and efficient way with minimum recourse to public money is fundamental to restoring confidence in Europe’s financial sector. The Single Resolution Mechanism, once in place, will be the authority applying these new rules in the context of the Banking Union. With these new rules in place, massive public bail-outs of banks and their consequences for taxpayers will finally be a practice of the past.
In other news Australia’s unemployment count moved up a tick, to 5.8% from the 5.7% previously. Meanwhile in Europe the Swiss national bank and its governor confirmed their intention to maintain the Swiss France at a loose peg versus the euro of 12000. They confirmed that they’d buy unlimited amounts of foreign currency in order to achieve this aim.
In another data release published in this morning’s session it would appear that French consumers are experiencing flat inflation in the price of their goods.
Nikkei sells off due to USA Fed taper rumours
Asian equities weakened with the Nikkei selling off sharply in the overnight trading session as the prospect of support for the US budget deal created fresh speculation that the Federal Reserve may bring forward and taper its monetary stimulus programme, prompting investor caution towards riskier assets.
China’s new yuan loans (and the broadest measure of Chinese credit) exceeded estimates last month in data at odds with indications that the government wants to curb borrowing. New local-currency loans were 624.6 billion yuan ($103 billion), the People’s Bank of China said yesterday in Beijing.
Swiss National Bank reaffirms minimum exchange rate
The Swiss National Bank (SNB) is maintaining its minimum exchange rate of CHF 1.20 per euro. The Swiss franc is still high. The SNB stands ready to enforce the minimum exchange rate, if necessary, by buying foreign currency in unlimited quantities, and to take further measures as required. With the three month Libor close to zero, the minimum exchange rate continues to be the right tool to avoid an undesirable tightening of monetary conditions in the event of renewed upward pressure on the Swiss franc.
French Consumer price index – November 2013
The Consumer prices Index stayed steady in November 2013, after a decrease by 0.1% in October 2013. Seasonally adjusted, it was also unchanged in November 2013 compared with October 2013. In the year to November 2013 it grew by 0.7%, up from +0.6% in October 2013. Excluding tobacco, the CPI stabilised also in November 2013 and increased by 0.6% compared with the same month one year ago.
Australia’s unemployment rate increases marginally
Employment increased to 11,645,500. Unemployment increased to 710,700. Unemployment rate increased by less than 0.1 pts to 5.8%, based on unrounded estimates. Participation rate at 64.8%. Aggregate monthly hours worked decreased to 1,641.6 million hours. Employment increased 21,000 to 11,659,900. Full-time employment increased 15,500 to 8,107,900 and part-time employment increased 5,500 to 3,552,000. Unemployment increased 3,400 (0.5%) to 712,500. The number of unemployed persons looking for full-time work decreased 3,500.
Market snapshot at 10:00 am UK time
The ASX 200 closed down 0.82%, the CSI 300 down 0.11%, the Hang Seng down 0.51%, whilst the Nikkei sold off sharply down 1.12%. European bourses have opened down; STOXX down 0.26%, CAC down 0.13%, DAX down 0.53%, FTSE down 0.35%. The MSCI Asia Pacific Index of stocks fell 0.9 percent following a 1.1 percent drop by the Standard & Poor’s 500 (SPX) Index yesterday.
Looking towards New York’s opening the DJIA equity index future is down 0.03%, SPX future down 0.01% and the NASDAQ future up marginally by 0.03%.
NYMEX WTI oil is up marginally by 0.08% at $97.52 per barrel, NYMEX nat gas is up 0.65% at $4.36 per therm. COMEX gold is currently down 0.29% at $1253.60 per ounce with silver down 0.50% at $20.26 per ounce.
Forex focus
The euro was little changed at $1.3784 early in the London session from yesterday, when it touched $1.3811, the highest since Oct. 29th. The seventh-straight gain matched its longest run since an eight-day advance to April 28th, 2011. The 17-nation currency added 0.3 percent to 141.55 yen. The dollar rose 0.3 percent to 102.69 yen, halting a two-day, 0.8 percent decline. The euro held a seven-day gain versus the dollar that matched its longest rally since April 2011, before European Central Bank President Mario Draghi speaks in the European Union parliament today.
The pound gained 0.1 percent $1.6386 early morning London time after dropping 0.4 percent yesterday, the most since Nov. 25th. The U.K. currency traded at 84.18 pence per euro after depreciating to 84.32 pence yesterday, the weakest level since Nov. 13th. The pound snapped its biggest decline in two weeks versus the dollar before Chancellor of the Exchequer George Osborne goes before a select committee to explain his year-end budget statement delivered last week.
Bonds
The 10-year Treasury yield was little changed at 2.85 percent early morning. It climbed five basis points yesterday, the most in three weeks. The price of the 2.75 percent note due in November 2023 was at 99 3/32, while the 3.75 percent November 2043 security traded at 97 21/32. Treasury 30-year yields headed for the biggest advance among developed nations’ bonds before data that may show retail sales rose, boosting bets the U.S. economy will be strong enough for a reduction in central bank stimulus. Japan’s 10-year government bond yield was little changed at 0.66 percent.
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